Executive Order Establishes Paid Sick Leave for Federal Contractors

Thursday, September 17, 2015

On September 7, 2015, President Obama signed an Executive Order requiring covered federal contractors and subcontractors (both referred to herein as “federal contractors”) to provide paid sick leave for their employees. Additionally, the President directed the Secretary of Labor to issue the implementing regulations by September 30, 2016, and therefore, additional consistent rules may be included when the proposed and final regulations are published.

How much paid sick leave are covered contractors required to provide under the Executive Order?

Under the Executive Order, federal contractors must provide at least one hour of paid sick leave for every 30 hours worked. Although a contractor may set a cap on the hours of paid sick leave an employee may accrue, a contractor may not cap the total accrual of paid sick leave per year, or at any time, at less than 56 hours. Additionally, accrued paid sick leave must carry over from one year to the next, and any accrued amount must be reinstated for employees rehired by a contractor within 12 months after a job separation. Nothing in the Executive Order, however, requires a contractor to provide a payout to an employee upon separation for unused, accrued sick leave.

For what reasons can employees use the paid sick leave?

The Executive Order requires employers to offer paid leave for the following four categories of occurrences:

Caring for a child, a parent, a spouse, a domestic partner or any other individual related by blood “or affinity whose close association with the employee is the equivalent of a family relationship” who satisfies the conditions under the preceding categories 1 and 2; or

Domestic violence, sexual assault or stalking, if the time absent from work is for the circumstances identified in categories 1 and 2, to obtain additional counseling, to seek relocation, to seek assistance from a victim services organization, to take related legal action, including preparation for or participation in any related civil or criminal legal proceeding or to assist an individual related to the employee in engaging in any of these activities.

What notice may the employer require?

An employer must provide paid sick leave upon the oral or written request of an employee where the notice includes the expected duration of the leave and is made at least seven calendar days in advance where the need is foreseeable, and in other cases, as soon as is practicable.

May an employer require certification?

A contractor may only require certification issued by a health care provider for paid sick leave used for the purposes listed in any of the first three categories if the employee has been absent for three or more consecutive workdays. Additionally, if an employee uses three or more consecutive days of paid sick leave for the fourth category of leave (issues arising from domestic violence, sexual assault or stalking), an employer may only require documentation—which may come from an “appropriate individual or organization”—that contains the minimum necessary information establishing a need for the employee to be absent from work. The contractor may not disclose any verification information and must maintain confidentiality about the domestic violence, sexual assault or stalking, unless the employee consents or when disclosure is required by law.

When do contractor obligations begin?

The Executive Order applies to covered contracts solicited or awarded on or after January 17, 2017.

Does the Executive Order apply to all federal contracts and subcontracts?

No. The Executive Order defines “covered contracts” to include:

Procurement contracts for services or construction;

Contracts or contract-like instruments for services covered by the Service Contract Act;

Contracts or contract-like instruments for concessions; and

Contracts or contract-like instruments “with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.”

Does the Executive Order apply to all employees of federal contractors?

It would appear not. The Executive Order requires that the paid sick leave benefits be extended to all employees “in the performance of the contract or any subcontract thereunder . . . .” The forthcoming regulations, however, may provide greater insight into this question.

Must employers update their contracts?

Yes, but only new covered contracts entered into on or after January 1, 2017. The new Executive Order will require employers to amend their purchase orders and contracts to include references to the new paid sick leave policy requirements. We expect that specific language will likely be set forth in the regulations to be issued.

Does the Executive Order impact employer obligations under state and municipal sick pay laws?

No. The Executive Order does not supersede any other federal, state or municipal law, or collective bargaining agreement that requires greater paid sick leave or leave rights than those established under the Executive Order.

What should employers do to prepare?

Although this Executive Order only affects covered contracts entered into on or after January 1, 2017, and the final regulations may not be issued until September 2016, employers can take the following steps now: (1) determine whether you are or are likely to become a covered contractor under the Executive Order; (2) keep a watchful eye for additional guidance in this area; and (3) conduct preliminary budget calculations to determine the potential cost of this Executive Order to aid in decision-making.

Farrah serves Michael Best in two capacities: as Deputy General Counsel and as a partner in the Labor and Employment Relations Practice Group. Her practice focuses on employment counseling and employment litigation, with a particular emphasis on discrimination, noncompetition, and Federal Contract Compliance Programs (OFCCP).

Jud represents management in all phases of employment law, including issues related to discrimination and harassment, wages and hours, family and medical leave, employment contracts, non-compete agreements, criminal background checks, and affirmative action. He also assists employers in investigating and responding to charges of discrimination and unfair labor practices, and advises clients on the avoidance and/or management of litigation in these areas.

Jud has experience representing clients before administrative agencies such as the Equal Employment Opportunity Commission, the Department of Labor and the National Labor Relations Board. His background also includes three years as an adjunct professor at the Cleveland-Marshall College of Law at Cleveland State University, where his course focused on the drafting of transactional documents such as employment contracts and settlement agreements.

Marion applies her extensive experience to a broad range of complex labor and employment and strategic planning issues, working with our lawyers on behalf of Michael Best clients.

Clients turn to Marion for comprehensive executive search services and placement for public and private entities, as well as targeted search services assistance in areas ranging from background and reference checking to preparation and negotiation of initial employment agreements.

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